Corporate health care giants are working to influence Democratic legislation that would prevent company owners from using bankruptcy proceedings to escape personal liability and shield their fortunes.
The legislation was authored to take on the Sackler family, which owns OxyContin-maker Purdue Pharma and has played a major role in the country’s opioid crisis. But the bill could have much broader implications for companies accused of wrongdoing — and that is likely why companies like drugmaker Johnson & Johnson and hospital chain Tenet Healthcare are already lobbying on it.
Purdue declared bankruptcy in 2019 to settle thousands of lawsuits related to its role in fueling the opioid epidemic. As part of the resulting bankruptcy negotiations, members of the Sackler family have offered to relinquish control of the company and pay roughly $4.2 billion to fund victim payouts in exchange for being released from any future opioid lawsuits personally directed at them. The settlement, which contains limited payouts, is set to complete in August.
The potential settlement has sparked widespread outcry, as it means the Sackler family could retain billions of dollars in wealth and not have to admit wrongdoing. The family was reportedly worth $10.8 billion last year. The opioid epidemic has caused at least 450,000 US deaths since 1999.
A group of more than two dozen state attorneys general still hope to sue the Sacklers for their role in the opioid epidemic. Earlier this month, the group filed a brief calling the proposed settlement “unprecedented,” “unjust,” and “unconfirmable as a matter of law.”
Holding the Sacklers Accountable
In response to the potential bankruptcy plan, representatives Carolyn Maloney (D-NY) and Mark DeSaulnier (D-CA) introduced legislation in March called the Stop Shielding Assets from Corporate Known Liability by Eliminating Non-Debtor Releases (SACKLER) Act.
In a joint statement, Maloney and DeSaulnier declared that their legislation “would hold members of the Sackler family accountable for their significant role in fueling an opioid crisis that has claimed nearly half a million lives.”
While the bill was written with the Sackler family in mind, it could have sweeping implications beyond the Purdue bankruptcy case. The legislation, as it is written now, would close a loophole that has allowed third parties who have not filed for bankruptcy to escape government lawsuits through the bankruptcy process.
Currently, federal appellate courts are split over whether or not Chapter 11 bankruptcy allows judges to issue such legal releases from lawsuits. The SACKLER Act would settle matters by preventing judges from allowing third parties to be released from legal claims by states, municipalities, federally recognized tribes, and the federal government, except in rare cases involving asbestos.
Jared Ellias, a bankruptcy law professor at University of California’s Hastings College of the Law, says that while third party releases are controversial because they appear to let offenders off the hook, such releases streamline the bankruptcy process by allowing bankruptcy judges to resolve all issues connected to a given case.
“Supporters of [the SACKLER Act] would say that it’s meant to keep people who haven’t filed for bankruptcy from walking away from civil liability,” he tells us. “But it would remove some of the versatility of the bankruptcy system in allowing judges to have tools to resolve problems, and that’s a reason why you could oppose this, even if you personally felt that what the Sacklers did here isn’t something they should be able to walk away from.”
For Nan Goldin, the matter is personal. Goldin is an opioid addiction survivor and founder of the group Prescription Addiction Intervention Now (P.A.I.N.), which is pushing public institutions to refuse all future Sackler family donations and calling on museums to rename their Sackler-related facilities and signage, such as the Guggenheim Museum’s Sackler Center for Arts Education and the American Museum of Natural History’s Sackler Educational Laboratory.
P.A.I.N. also wants courts to seize the family’s entire fortune and use it to combat the opioid epidemic, which is why Goldin is involved in the Purdue bankruptcy lawsuit as part of the Ad Hoc Committee on Accountability, a group of individuals that is fighting to stop Sackler family members from obtaining immunity.
She says the SACKLER Act is the only way justice will be done.
“The only thing that can prevent [this case] from ending with their civil immunity is if this act gets passed before August,” says Goldin, referring to when the settlement is scheduled to be completed. “If they get away with this, it’s just going to open the door to all the predators in the world, all the billionaires.”
Megan Kapler, another member of P.A.I.N., says the Purdue bankruptcy suit is one of the most important opioid cases in history and is ill-suited for private bankruptcy proceedings. She is frustrated about the terms of the proposed settlement, such as indications that victims’ payouts would be relatively small and might not go to people who obtained opioids “off the street,” as she put it.
Kapler instead thinks the Sackler family deserves to face trial — and believes the SACKLER Act would ensure that happens.
“What this bill would mean to us is actual accountability,” she says, noting that otherwise, “They’re getting everything they want,” including reorganizing Purdue as a public benefit corporation.
“This Bill Would Terrify Corporations”
Lobbying records show that Johnson & Johnson and Tenet Healthcare have been lobbying on the SACKLER Act.
Johnson & Johnson, one of three companies whose COVID-19 vaccines are being used widely in the United States and whose poppy fields supplied Purdue with the poppies for its OxyContin, reported lobbying Congress “regarding all provisions” of the SACKLER Act.
Tenet’s filing says the company has lobbied Congress and the Biden administration on the bill.
Spokespeople for Johnson & Johnson and Tenet did not respond to requests for comment.
While the lobbying filings do not indicate whether the corporations are lobbying for or against the legislation, Ellias explains that large companies are likely to oppose the SACKLER Act for a number of reasons, including that former company executives regularly avoid civil liability lawsuits through bankruptcy filings and third-party releases.
“Companies are always looking for tools to deal with issues that they have, and if this act is passed, it removes one tool that companies have used to deal with liability that they might owe in connection with things they’ve done in the past,” says Ellias.
P.A.I.N. member Kapler agrees. “I think why this bill would terrify corporations is that executives who pull the strings operate with the standpoint that they will be immune to any kind of lawsuits targeting their company,” she says.
Both Johnson & Johnson and Tenet have faced their fair share of liability lawsuits.
For Johnson & Johnson, that includes opioid lawsuits. In August 2019, an Oklahoma judge ordered Johnson & Johnson to pay $572 million to the state, finding it had relied on its reputation as a family company to sell opioids while underselling the risk they posed.
Last year, a California judge ruled the pharmaceutical giant had to pay $344 million in damages after the transvaginal pelvic mesh implants it sold as a treatment for organ prolapse caused bleeding and excruciating pain. Many women needed surgeries to remove the implants.
Johnson & Johnson has also set aside $4 billion in litigation fees to pay for more than 25,000 lawsuits related to talc products that allegedly caused cancers and other conditions — although these suits would be exempted from the SACKLER Act because the products in question contained asbestos.
Tenet, meanwhile, agreed in 2009 to pay $395 million to settle claims that doctors at one of the company’s facilities had performed unnecessary heart and other surgeries on hundreds of patients. Last year, the company agreed to pay $1.4 million to resolve allegations that a different Tenet facility knowingly billed Medicare for implanting unnecessary cardiac monitors.
Political contribution disclosures by Tenet show the company has donated more than $2.8 million since 2019 to the Partnership for America’s Health Care Future, a health care industry front group created to oppose health care reform proposals like Medicare for All and a public health insurance option.